Question

Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. On April 1, 2018, Alice sells her land subject to the mortgage for $325,000 in cash, a note for $300,000, and property with a fair market value of $60,000. What is Alice's amount realized on this sale?

a. $685,000.
b. $800,000.
c. $840,000.
d. $860,000.
e. None of the above.

Answer 1

Alice's amount realized on the sale of the land is $380,000.

Step-by-step explanation:

Alice's amount realized on the sale of the land can be calculated by subtracting the adjusted basis from the total consideration. The total consideration includes the cash received, the note, and the fair market value of the property.

Total consideration = Cash + Note + Fair market value of property

Total consideration = $325,000 + $300,000 + $60,000

Total consideration = $685,000

Amount realized = Total consideration - Adjusted basis

Amount realized = $685,000 - $305,000

Amount realized = $380,000